U.K. energy giant BP has reached an agreement to sell its petrochemicals business to Ineos for $5 billion.
The deal includes a $400 million deposit by Ineos and $3.6 billion on completion. The remaining $1 billion will be paid in three separate installments by June 2021.
In buying the petrochemicals business, Ineos is acquiring BP’s aromatics and acetyls businesses, which will help it get a foothold in Asia.
“It’s two big pieces of chemistry in that portfolio that we didn’t have before. It completes the set,” Ineos director Tom Crotty said.
Crotty said most of the $5 billion purchase cost would be funded with debt.
“This is another significant step as we steadily work to reinvent BP,” Looney said. “These businesses are leaders in their sectors, with world-class technologies, plants, and people. In recent years they have improved performance to produce highly competitive returns and now have the potential for growth and expansion into the circular economy.”
In a statement, BP said the deal was “the next strategic step” in the reinvention of the company.
BP had committed to selling off $15 billion in assets and to reducing capital spending by $3 billion.
“With today’s announcement we have met our $15 billion target for agreed divestments a full year ahead of schedule, demonstrating the range and quality of options available to us,” said chief financial officer Brian Gilvary.
In February, BP’s new chief executive officer, Bernard Looney, pledged to dramatically cut emissions from its operations and from the products it sells as part of a “reinvention” of the 111-year-old company, but the COVID-19 crisis has helped accelerate that move.
BP’s earnings fell 66% in the first quarter.
BP is planning a capital markets day where it will discuss its new strategic direction in mid-September. The company expects to report its second quarter 2020 results on August 4.